On September 1, 2021, in an appeal from the United States District Court for the Central District of California (“DCCDC”), The United States Court of Appeals for the Federal Circuit (“CAFC”) clarified the standard for damages under 35 U.S.C §287 in a precedential opinion in Lubby Holdings LLC, Vaporous Technologies, Inc. v. Henry Chung. Lubby Holdings LLC, Vaporous Technologies, Inc. (“Lubby”) sued Mr. Henry Chung (“Mr. Chung”) for directly infringing on U.S. Patent No. 9,750,284 (“the ‘284 patent”). The ‘284 patent covers an electronic conductive check valve that blocks vaporizing media from leaking out when the product is not in use and delivers electronic power to a heating element during use. The DCCDC found Mr. Chung liable for infringing on the ‘284 patent and awarded Lubby $863,936.10 in damages. Mr. Chung appealed the DCCDC’s decision and argued that (1) he cannot be liable for infringement based on acts that he took on behalf of his company unless Lubby established that it was appropriate to pierce the corporate veil, and (2) the record lacks substantial evidence that Lubby complied with the marking and notice requirements under 35 U.S.C. §287 to support the jury’s verdict awarding Lubby $863,936.10 in damages.
Despite Mr. Chung’s arguments against liability for infringing on the ‘284 patent, CAFC held that “the fact that Mr. Chung may have acted on behalf of his corporation does not excuse him from individual liability” in light of the evidence presented, the deferential standard of review, and the jury verdict. Lubby Holdings LLC, Vaporous Technologies, Inc. v. Henry Chung, No. 2:18-cv-00715-RGK-JC, 2019-2286 (Fed. Cir. 2021). As to the notice requirement under 35 U.S.C. § 287, CAFC held that the DCCDC “erred in awarding damages for the sales of infringing products prior to the commencement this action because Lubby failed to give Mr. Chung actual notice of infringement. Id. CAFC stated that “an infringer’s admission that he had notice that the patent issued does not equate to actual notice” under 35 U.S.C §287, citing in support Amsted Indus. Inc. v. Buckeye Steel Castings Co., 24 F.3d 178, 187 (Fed. Cir. 1994), wherein the court stated that “[i]t is irrelevant whether the defendant knew of the patent or knew of his own infringement, and the correct approach to determining notice must focus on the action of the patentee, not the knowledge or understanding of the infringer.” Lubby, No. 2:18-cv-00715-RGK-JC, 2019-2286.
The CAFC affirmed in part, reversed in part, and remanded for a new trial to determine the number of infringing products sold after the date of actual notice and for the determination of a reasonable royalty rate for the sale of those units. Id.
Under 35 U.S.C §287(a),
“Patentees, and persons making, offering for sale, selling within the United States, or importing into the United States any patented articles, may give notice to the public that the same is patented, whether by fixing thereon the word “patent” or the abbreviation “pat.”, together with the number of the patent, or when this cannot be done, by fixing to it, or to the package wherein one or more of them is contained, a label containing a like notice. In the event of failure so to mark, no damages shall be recovered by the patentee in any action for infringement, except on proof that the infringer was notified of the infringement and continued to infringe thereafter, in which event damages may be recovered only for infringement occurring after such notice. Filing an action for infringement shall constitute such notice.” 35 U.S.C §287(a).
It is the patentee’s burden to prove compliance with this statute. Arctic Cat Inc. v. Bombardier Recreational Prods. Inc., 876 F.3d 1350, 1365 (Fed. Cir. 2017). Under the statute, notice is of the infringement and not notice of the patent’s existence. Amsted, 24 F.3d at 187. Actual notice “is satisfied when the recipient is informed of the identity of the patent,” the allegedly infringing activity, and is given an option as to how to stop infringement. SRI Int’l, Inc. v Advanced Tech Labs., Inc., 127 F.3d 1462, 1470 (Fed. Cir. 1997).
An alleged infringer has the burden of production and does not bear the burden of proving or disproving that a patentee complied with 35 U.S.C. §287(a). Id. at 1368. The alleged infringer’s burden is a burden of production, not one of persuasion or proof. Lubby, No. 2:18-cv-00715-RGK-JC, 2019-2286 (citing Dunlap v. Schofield, 152 U.S. 244, 248 (1894)). The alleged infringer’s burden is met by articulating what products it believes are unmarked as required under the statute. Id. The alleged infringer need only put the patentee on notice that it sold specific unmarked products which the alleged infringer believes practice the patent. Id. Upon articulating those products, the burden shifts to the patentee to prove the identified products do not incorporate the patented invention or establish that the products were marked in accordance with §287(a). Lubby, No. 2:18-cv-00715-RGK-JC, 2019-2286.
When a patented technology is inadequately marked, the public does not have adequate notice of the patented product. The issue then, as seen in Lubby, is not liability for infringement, but rather the recoverable amount of damages. Patent laws do not allow recovery for infringement that occurred more than six (6) years prior to the filing of the lawsuit. Where there is inadequate patent marking, a patentee is limited to a damages award for the time period during which the alleged infringement was on actual notice. When a patent is inadequately marked, showing the existence of an agreement between the parties in which the alleged infringer agreed not to use the technology is insufficient to prove that the alleged infringer had actual notice because it does not communicate a charge of infringement. Id. The rules tilt the balance of justice in favor of the infringer and against the patentee, thereby putting a heavy burden on the patentee to demonstrate it provided the infringer with “an affirmative communication of a specific charge of infringement by a specific accused product or device”. Artic Cat, 950 F.3d at 864 (quoting Amsted, 24 F.3d at 187).
In the present case, the CAFC determined that Lubby provided actual notice, sufficient to meet the requirements of §287(a) only when Lubby filed the lawsuit alleging that Mr. Chung infringed on patent ‘284. Any communication prior to the lawsuit was not sufficiently detailed to rise to the level of actual notice. Lubby was barred from recovering damages for units sold prior to the filing of the lawsuit. This case has been remanded for a new trial to determine damages for infringing products sold after the date of actual notice, at which point, the monetary damages will be reassessed by a jury.